India is the third largest market after China & Japan in Asia in respect of retail market and this market plays a major role in Indian economy.. From 1996 till date, the present government has taken several decisions with reference to FDI in retail sector. According to the policy framework by the Indian government, with respect to retail sector foreign retailers will be allowed to hold 51 percent stake in multi brand and 100 percent in single brand formats. Many giant players in retail such like Walmart, Tesco are expected to enter in India very soon. India is slightly different from other developed countries. The present paper attempts to analyse FDI issues in the Indian retail industry. The findings of the study about FDI in retail would undoubtedly uncover the future opportunities for FDI in retail sector and thus enable the country to boost up the economy. INTRODUCTION Retail has played a major role in any country’s economy as it is one of the largest employment generators and fastest growing sectors. Many developed and developing countries such like China, Brazil, Chile, Indonesia, Malaysia, Russia, Singapore and Thailand have allowed 100% FDI in multi brand retail. China permitted FDI in retail in 1992 and no effect on small traders although they co-exist with improvement in services. Indonesia where 90% of the business still remains in the hands of small traders. India is having various forms of foreign investment, among them FDI flows are usually preferred over other forms of external finance. FDI provides a win-win situation to both the home and host countries. The home countries want to take the advantage of expanded new market for growth of industrialization. On the other hand host countries want foreign capital for enhancement of infrastructure, technical and managerial skills. Other advantages associated with Foreign Direct Investment are economic development, rise in purchasing power & growing consumerism. Till May 2012, the total FDI equity inflows in the single brand retail trade were Rs 204.07 crore. Due to foreign investment, it is possible to have positive effect on economic growth by increase in per capita income leading to more consumption from necessity items to discretionary consumption. It also has few threats as it can lead to promotion of unhealthy competition among organised domestic retailers resulting in exit of small retailers from the market and distortion of urban culture. FDI IN INDIAN RETAIL – A HISTORICAL PERESPECTIVE FDI as defined in Dictionary of Economics (Graham Bannock et.al) is investment in a foreign country through the acquisition of a local company or the establishment there of an operation on a new (Greenfield) site. To put in simple words, FDI refers to capital inflows from abroad that is invested in or to enhance the production capacity of the economy. The foreign investors are free to invest in India, except few sectors/activities, where prior approval from the RBI or Foreign Investment Promotion Board (FIPB) would be required. India has taken various decisions with regard to FDI in retail sector since 1995. These are as follows1995, World Trade Organization’s General Agreement on Trade in Services, which includes both wholesale and retailing services, came into effect. 1997, FDI in cash and carry (wholesale) with 100% rights allowed under government approval route. 2006, FDI in cash and carry (wholesale) brought under the automatic route. Up to 51% investment in a single brand retail permitted. 2011, 100% FDI in single brand retail permitted. 2012, 51% FDI in multi-brand retail permitted. CONDITIONALITIES FOR FDI IN RETAIL Indian Govt allowed 51% FDI in multi brand and 100% in single brand in place of the earlier ceiling of49%. FDI is not allowed under the automatic route in all cases as it also requires FIPB approval in many cases decided on case to case basis. 1. Foreign retailer has to invest minimum $100 million. (In case of Multi Brand) 2. 50% of the investment has to be for improving the backend infrastructure. (In case of Multi Brand) 3. 30% of all procured materials have to be procured from the small and medium enterprises. 4. Permission to set retail stores only in cities with a minimum population of 10 lakhs. (In case of Multi Brand Retail) 5. Govt has the first right to procure material from the farmers. MEANING OF RETAIL Retail means sale of goods directly to the consumers or the final users by persons who are link between suppliers & consumers. Walmart, Tesco, Big Bazaar, Westside, Pantaloon are a few examples to quote. SINGLE BRAND RETAIL The foreign investor should be an owner of the brand, retail chains or stores and shall sell products of single brand only across all outlets. FDI IN SINGLE-BRAND RETAIL The Government has not categorically defined the meaning of ―Single Brand anywhere---neither in any of its circulars